Self-Regulatory Organizations; MEMX LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule, 64004-64007 [2023-20081]
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64004
Federal Register / Vol. 88, No. 179 / Monday, September 18, 2023 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,13 and Rule
19b–4(f)(2) 14 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
lotter on DSK11XQN23PROD with NOTICES1
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
PEARL–2023–43 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–PEARL–2023–43. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–PEARL–2023–43 and should be
submitted on or before October 10,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–20084 Filed 9–15–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98360; File No. SR–MEMX–
2023–21]
Self-Regulatory Organizations; MEMX
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Exchange’s Fee
Schedule
September 12, 2023.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
31, 2023, MEMX LLC (‘‘MEMX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
13 15
14 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposed rule change to
amend the Exchange’s fee schedule
applicable to Members 4 (the ‘‘Fee
Schedule’’) pursuant to Exchange Rules
15.1(a) and (c). The Exchange proposes
to implement the changes to the Fee
Schedule pursuant to this proposal
immediately. The text of the proposed
rule change is provided in Exhibit 5.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Fee Schedule to
make orders that add non-displayed
volume in securities priced at or below
$1.00 per share eligible to receive the
Sub-Dollar Rebate Tier. This change in
the Fee Schedule would make all
executions that add volume eligible for
the Sub-Dollar Rebate when a Member
reaches the applicable criteria,
regardless of whether such added
volume is displayed or non-displayed.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues,
to which market participants may direct
their order flow. Based on publicly
available information, no single
registered equities exchange currently
has more than approximately 15% of
the total market share of executed
4 See
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Exchange Rule 1.5(p).
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volume of equities trading.5 Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow,
and the Exchange currently represents
approximately 3% of the overall market
share.6 The Exchange in particular
operates a ‘‘Maker-Taker’’ model
whereby it provides rebates to Members
that add liquidity to the Exchange and
charges fees to Members that remove
liquidity from the Exchange. The Fee
Schedule sets forth the standard rebates
and fees applied per share for orders
that add and remove liquidity,
respectively. Additionally, in response
to the competitive environment, the
Exchange also offers tiered pricing,
which provides Members with
opportunities to qualify for higher
rebates or lower fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
Currently, the Exchange provides a
rebate of 0.15% of the total dollar value
of the transaction for executions of
orders in securities priced below $1.00
per share that add displayed liquidity to
the Exchange (such orders, ‘‘Added
Displayed Sub-Dollar Volume’’) for
Members that qualify for such tier by
achieving a Sub-Dollar ADAV 7 that is
equal to or greater than 5,000,000
shares. A footnote in the current Fee
Schedule states that the Sub-Dollar
Rebate applies to executions of added
displayed volume in securities priced
below $1.00 per share. Thus, the SubDollar Rebate does not currently apply
to executions of added non-displayed
volume that add liquidity to the
Exchange (such orders, ‘‘Added NonDisplayed Sub-Dollar Volume’’). Now,
the Exchange proposes to modify the
types of orders which qualify for the
Sub-Dollar Rebate, such that orders
which add displayed liquidity as well as
orders which add non-displayed
liquidity to the Exchange in securities
priced below $1.00 per share would be
eligible for the Sub-Dollar Rebate. To
clarify, the Sub-Dollar Rebate would
apply to executions of both Added
5 Market share percentage calculated as of August
31, 2023. The Exchange receives and processes data
made available through consolidated data feeds
(i.e., CTS and UTDF).
6 Id.
7 ‘‘Sub-Dollar ADAV’’ means ADAV with respect
to orders in securities priced below $1.00 per share.
‘‘ADAV’’ means average daily added volume
calculated as the number of shares added per day,
calculated on a monthly basis.
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Displayed Sub-Dollar Volume and
Added Non-Displayed Sub-Dollar
Volume when a Member meets the
required criteria for the tier. The
Exchange would alter the footnote in the
Sub-Dollar Rebate Tier section of the
Fee Schedule to remove the word
‘‘displayed’’, such that all executions
which add volume to the Exchange
would be eligible for the Sub-Dollar
Rebate. At this time, the Exchange does
not propose to change the rebate amount
nor the required criteria for the SubDollar Rebate Tier.
The Exchange believes that this
modification to the method of applying
the Sub-Dollar Rebate Tier would
encourage the submission of both
displayed and non-displayed orders in
securities priced below $1.00 per share
that add liquidity to the Exchange. The
Exchange believes that it would
contribute to a more robust and wellbalanced market ecosystem of both
displayed and non-displayed orders
which add liquidity on the Exchange, to
the benefit of all Members and market
participants. The Exchange notes that
the Sub-Dollar Rebate Tier would
continue to be available to all Members
and, while the Exchange has no way of
predicting with certainty how the
proposed new modification will impact
Member activity, the Exchange expects
that more Members will qualify or strive
to qualify for the Sub-Dollar Rebate Tier
than currently do under the proposed
new calculation method, as it is more
expansive and includes additional types
of executions which would be eligible to
receive the rebate under the tier.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,8
in general, and with Sections 6(b)(4) and
6(b)(5) of the Act,9 in particular, in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among its Members and other
persons using its facilities and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
As discussed above, the Exchange
operates in a highly fragmented and
competitive market in which market
participants can readily direct order
flow to competing venues if they deem
fee levels at a particular venue to be
excessive or incentives to be
insufficient, and the Exchange
represents only a small percentage of
the overall market. The Commission and
the courts have repeatedly expressed
8 15
9 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(4) and (5).
Frm 00077
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64005
their preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. In Regulation NMS,
the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and also recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 10
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow or discontinue to
reduce use of certain categories of
products, in response to new or
different pricing structures being
introduced into the market.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates, and market
participants can readily trade on
competing venues if they deem pricing
levels at those other venues to be more
favorable. The Exchange believes the
proposal reflects a reasonable and
competitive pricing structure designed
to encourage market participants to
strive for higher volume on the
Exchange, which the Exchange believes
would promote price discovery and
enhance liquidity and market quality on
the Exchange to the benefit of all
Members and market participants.
The Exchange notes that volumebased incentives such as the Sub-Dollar
Rebate Tier have been widely adopted
by exchanges (including the Exchange),
and are reasonable, equitable, and not
unfairly discriminatory because they are
open to all members on an equal basis
and provide additional benefits or
discount that are reasonably related to
the value to an exchange’s market
quality associated with higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns, and the introduction of higher
volumes of orders into the price and
volume discovery process.
The Exchange believes the proposal to
include Added Non-Displayed SubDollar Volume in the executions eligible
to qualify for the Sub-Dollar Rebate is
reasonable because, as noted above,
such change would keep the existing
criteria and rebate amount intact and
provide more opportunities for a
Member to achieve the rebate. Members
may be incentivized to submit
additional orders which add displayed
liquidity and which add non-displayed
10 Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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Federal Register / Vol. 88, No. 179 / Monday, September 18, 2023 / Notices
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liquidity in securities priced below
$1.00 per share, thereby contributing to
a more robust and well-balanced market
ecosystem on the Exchange to the
benefit of all Members and market
participants. The Exchange also believes
the proposal is equitable and not
unfairly discriminatory because all
Members will continue to be eligible to
meet the Sub-Dollar Rebate Tier criteria,
including Members who currently
receive the Sub-Dollar Rebate under the
current method. As noted above, while
the Exchange has no way of predicting
with certainty how the proposed new
criteria will impact Member activity, the
Exchange expects that this change will
incentivize more Members to strive to
qualify for such tier under the proposed
new method, as the new method is more
expansive and would make the SubDollar Rebate applicable to additional
executions.
For the reasons discussed above, the
Exchange submits that the proposal
satisfies the requirements of Sections
6(b)(4) and 6(b)(5) of the Act 11 in that
it provides for the equitable allocation
of reasonable dues, fees and other
charges among its Members and other
persons using its facilities and is not
designed to unfairly discriminate
between customers, issuers, brokers, or
dealers. As described more fully below
in the Exchange’s statement regarding
the burden on competition, the
Exchange believes that its transaction
pricing is subject to significant
competitive forces, and that the
proposed fees and rebates described
herein are appropriate to address such
forces.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposal will result in any burden
on competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. Instead, as
discussed above, the proposal is
intended to incentivize market
participants to direct additional order
flow to the Exchange in the form of both
displayed and non-displayed liquidity
in securities priced below $1.00 per
share, which the Exchange believes
would promote price discovery and
enhance liquidity and market quality on
the Exchange to the benefit of all
Members and market participants. As a
result, the Exchange believes the
proposal would enhance its
competitiveness as a market that attracts
actionable orders, thereby making it a
more desirable destination venue for its
customers. For these reasons, the
11 15
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
18:29 Sep 15, 2023
Exchange believes that the proposal
furthers the Commission’s goal in
adopting Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 12
Intramarket Competition
As discussed above, the Exchange
believes that the proposal would
incentivize Members to submit
additional order flow to the Exchange in
the form of both displayed and nondisplayed orders in securities priced
below $1.00 per share, thereby
enhancing liquidity and market quality
on the Exchange to the benefit of all
Members, as well as enhancing the
attractiveness of the Exchange as a
trading venue, which the Exchange
believes, in turn, would continue to
encourage market participants to direct
additional order flow to the Exchange.
Greater liquidity benefits all Members
by providing more trading opportunities
and encourages Members to send
additional orders to the Exchange,
thereby contributing to robust levels of
liquidity, which benefits all market
participants.
The Exchange does not believe that
the proposed change to the Sub-Dollar
Rebate Tier would impose any burden
on intramarket competition because
such change may incentivize Members
to submit additional order flow, thereby
contributing to a more robust and wellbalanced market ecosystem on the
Exchange to the benefit of all Members
as well as enhancing the attractiveness
of the Exchange as a trading venue,
which the Exchange believes, in turn,
would continue to encourage market
participants to direct additional order
flow to the Exchange. Greater liquidity
benefits all Members by providing more
trading opportunities and encourages
Members to send additional orders to
the Exchange, thereby contributing to
robust levels of liquidity, which benefits
all market participants. The opportunity
to qualify for the Sub-Dollar Rebate Tier
would be available to all Members that
meet the associated volume
requirements in any month. For the
foregoing reasons, the Exchange believes
the proposed change would not impose
any burden on intramarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intermarket Competition
As noted above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
12 See
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supra note 10.
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venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. Members
have numerous alternative venues that
they may participate on and direct their
order flow to, including 15 other
equities exchanges and numerous
alternative trading systems and other
off-exchange venues. As noted above, no
single registered equities exchange
currently has more than approximately
15% of the total market share of
executed volume of equities trading.
Thus, in such a low-concentrated and
highly competitive market, no single
equities exchange possesses significant
pricing power in the execution of order
flow. Moreover, the Exchange believes
that the ever-shifting market share
among the exchanges from month to
month demonstrates that market
participants can shift order flow or
discontinue to reduce use of certain
categories of products, in response to
new or different pricing structures being
introduced into the market.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees and rebates and market participants
can readily choose to send their orders
to other exchange and off-exchange
venues if they deem fee levels at those
other venues to be more favorable. As
described above, the proposed change
represents a competitive proposal
through which the Exchange is seeking
to incentivize market participants to
direct additional order flow to the
Exchange through the volume-based
Sub-Dollar Rebate Tier. Volume-based
tiers have been widely adopted by
exchanges, including the Exchange.
Accordingly, the Exchange believes the
proposal would not burden, but rather
promote, intermarket competition by
enabling it to better compete with other
exchanges that offer tiered pricing
structures and incentives to market
participants.
Additionally, the Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 13 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. SEC, the D.C. Circuit
13 See
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Federal Register / Vol. 88, No. 179 / Monday, September 18, 2023 / Notices
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’.14 Accordingly, the
Exchange does not believe its proposed
pricing change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 15 and Rule
19b–4(f)(2) 16 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
MEMX–2023–21 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–MEMX–2023–21. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–MEMX–2023–21 and should be
submitted on or before October 10,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–20081 Filed 9–15–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
PLACE:
This meeting will be closed to
the public.
STATUS:
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or her designee, has
certified that, in her opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
Dated: September 14, 2023.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2023–20224 Filed 9–14–23; 11:15 am]
BILLING CODE 8011–01–P
Sunshine Act Meetings
14 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSE–2006–21)).
15 15 U.S.C. 78s(b)(3)(A)(ii).
16 17 CFR 240.19b–4(f)(2).
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18:29 Sep 15, 2023
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1:00 p.m. on Thursday,
September 21, 2023.
TIME AND DATE:
17 17
PO 00000
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
[Notices]
[Pages 64004-64007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20081]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98360; File No. SR-MEMX-2023-21]
Self-Regulatory Organizations; MEMX LLC; Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend the
Exchange's Fee Schedule
September 12, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on August 31, 2023, MEMX LLC (``MEMX'' or the ``Exchange'')
filed with the Securities and Exchange Commission (the ``Commission'')
the proposed rule change as described in Items I, II and III below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to amend the Exchange's fee schedule applicable to Members \4\ (the
``Fee Schedule'') pursuant to Exchange Rules 15.1(a) and (c). The
Exchange proposes to implement the changes to the Fee Schedule pursuant
to this proposal immediately. The text of the proposed rule change is
provided in Exhibit 5.
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\4\ See Exchange Rule 1.5(p).
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II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Fee
Schedule to make orders that add non-displayed volume in securities
priced at or below $1.00 per share eligible to receive the Sub-Dollar
Rebate Tier. This change in the Fee Schedule would make all executions
that add volume eligible for the Sub-Dollar Rebate when a Member
reaches the applicable criteria, regardless of whether such added
volume is displayed or non-displayed.
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues, to
which market participants may direct their order flow. Based on
publicly available information, no single registered equities exchange
currently has more than approximately 15% of the total market share of
executed
[[Page 64005]]
volume of equities trading.\5\ Thus, in such a low-concentrated and
highly competitive market, no single equities exchange possesses
significant pricing power in the execution of order flow, and the
Exchange currently represents approximately 3% of the overall market
share.\6\ The Exchange in particular operates a ``Maker-Taker'' model
whereby it provides rebates to Members that add liquidity to the
Exchange and charges fees to Members that remove liquidity from the
Exchange. The Fee Schedule sets forth the standard rebates and fees
applied per share for orders that add and remove liquidity,
respectively. Additionally, in response to the competitive environment,
the Exchange also offers tiered pricing, which provides Members with
opportunities to qualify for higher rebates or lower fees where certain
volume criteria and thresholds are met. Tiered pricing provides an
incremental incentive for Members to strive for higher tier levels,
which provides increasingly higher benefits or discounts for satisfying
increasingly more stringent criteria.
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\5\ Market share percentage calculated as of August 31, 2023.
The Exchange receives and processes data made available through
consolidated data feeds (i.e., CTS and UTDF).
\6\ Id.
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Currently, the Exchange provides a rebate of 0.15% of the total
dollar value of the transaction for executions of orders in securities
priced below $1.00 per share that add displayed liquidity to the
Exchange (such orders, ``Added Displayed Sub-Dollar Volume'') for
Members that qualify for such tier by achieving a Sub-Dollar ADAV \7\
that is equal to or greater than 5,000,000 shares. A footnote in the
current Fee Schedule states that the Sub-Dollar Rebate applies to
executions of added displayed volume in securities priced below $1.00
per share. Thus, the Sub-Dollar Rebate does not currently apply to
executions of added non-displayed volume that add liquidity to the
Exchange (such orders, ``Added Non-Displayed Sub-Dollar Volume''). Now,
the Exchange proposes to modify the types of orders which qualify for
the Sub-Dollar Rebate, such that orders which add displayed liquidity
as well as orders which add non-displayed liquidity to the Exchange in
securities priced below $1.00 per share would be eligible for the Sub-
Dollar Rebate. To clarify, the Sub-Dollar Rebate would apply to
executions of both Added Displayed Sub-Dollar Volume and Added Non-
Displayed Sub-Dollar Volume when a Member meets the required criteria
for the tier. The Exchange would alter the footnote in the Sub-Dollar
Rebate Tier section of the Fee Schedule to remove the word
``displayed'', such that all executions which add volume to the
Exchange would be eligible for the Sub-Dollar Rebate. At this time, the
Exchange does not propose to change the rebate amount nor the required
criteria for the Sub-Dollar Rebate Tier.
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\7\ ``Sub-Dollar ADAV'' means ADAV with respect to orders in
securities priced below $1.00 per share. ``ADAV'' means average
daily added volume calculated as the number of shares added per day,
calculated on a monthly basis.
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The Exchange believes that this modification to the method of
applying the Sub-Dollar Rebate Tier would encourage the submission of
both displayed and non-displayed orders in securities priced below
$1.00 per share that add liquidity to the Exchange. The Exchange
believes that it would contribute to a more robust and well-balanced
market ecosystem of both displayed and non-displayed orders which add
liquidity on the Exchange, to the benefit of all Members and market
participants. The Exchange notes that the Sub-Dollar Rebate Tier would
continue to be available to all Members and, while the Exchange has no
way of predicting with certainty how the proposed new modification will
impact Member activity, the Exchange expects that more Members will
qualify or strive to qualify for the Sub-Dollar Rebate Tier than
currently do under the proposed new calculation method, as it is more
expansive and includes additional types of executions which would be
eligible to receive the rebate under the tier.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\8\ in general, and with
Sections 6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among its Members and other persons using its facilities
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4) and (5).
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As discussed above, the Exchange operates in a highly fragmented
and competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive or incentives to be insufficient, and the
Exchange represents only a small percentage of the overall market. The
Commission and the courts have repeatedly expressed their preference
for competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \10\
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\10\ Securities Exchange Act Release No. 51808 (June 9, 2005),
70 FR 37496, 37499 (June 29, 2005).
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The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to new or different pricing structures being
introduced into the market. Accordingly, competitive forces constrain
the Exchange's transaction fees and rebates, and market participants
can readily trade on competing venues if they deem pricing levels at
those other venues to be more favorable. The Exchange believes the
proposal reflects a reasonable and competitive pricing structure
designed to encourage market participants to strive for higher volume
on the Exchange, which the Exchange believes would promote price
discovery and enhance liquidity and market quality on the Exchange to
the benefit of all Members and market participants.
The Exchange notes that volume-based incentives such as the Sub-
Dollar Rebate Tier have been widely adopted by exchanges (including the
Exchange), and are reasonable, equitable, and not unfairly
discriminatory because they are open to all members on an equal basis
and provide additional benefits or discount that are reasonably related
to the value to an exchange's market quality associated with higher
levels of market activity, such as higher levels of liquidity provision
and/or growth patterns, and the introduction of higher volumes of
orders into the price and volume discovery process.
The Exchange believes the proposal to include Added Non-Displayed
Sub-Dollar Volume in the executions eligible to qualify for the Sub-
Dollar Rebate is reasonable because, as noted above, such change would
keep the existing criteria and rebate amount intact and provide more
opportunities for a Member to achieve the rebate. Members may be
incentivized to submit additional orders which add displayed liquidity
and which add non-displayed
[[Page 64006]]
liquidity in securities priced below $1.00 per share, thereby
contributing to a more robust and well-balanced market ecosystem on the
Exchange to the benefit of all Members and market participants. The
Exchange also believes the proposal is equitable and not unfairly
discriminatory because all Members will continue to be eligible to meet
the Sub-Dollar Rebate Tier criteria, including Members who currently
receive the Sub-Dollar Rebate under the current method. As noted above,
while the Exchange has no way of predicting with certainty how the
proposed new criteria will impact Member activity, the Exchange expects
that this change will incentivize more Members to strive to qualify for
such tier under the proposed new method, as the new method is more
expansive and would make the Sub-Dollar Rebate applicable to additional
executions.
For the reasons discussed above, the Exchange submits that the
proposal satisfies the requirements of Sections 6(b)(4) and 6(b)(5) of
the Act \11\ in that it provides for the equitable allocation of
reasonable dues, fees and other charges among its Members and other
persons using its facilities and is not designed to unfairly
discriminate between customers, issuers, brokers, or dealers. As
described more fully below in the Exchange's statement regarding the
burden on competition, the Exchange believes that its transaction
pricing is subject to significant competitive forces, and that the
proposed fees and rebates described herein are appropriate to address
such forces.
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\11\ 15 U.S.C. 78f(b)(4) and (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal will result in any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. Instead, as discussed above,
the proposal is intended to incentivize market participants to direct
additional order flow to the Exchange in the form of both displayed and
non-displayed liquidity in securities priced below $1.00 per share,
which the Exchange believes would promote price discovery and enhance
liquidity and market quality on the Exchange to the benefit of all
Members and market participants. As a result, the Exchange believes the
proposal would enhance its competitiveness as a market that attracts
actionable orders, thereby making it a more desirable destination venue
for its customers. For these reasons, the Exchange believes that the
proposal furthers the Commission's goal in adopting Regulation NMS of
fostering competition among orders, which promotes ``more efficient
pricing of individual stocks for all types of orders, large and
small.'' \12\
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\12\ See supra note 10.
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Intramarket Competition
As discussed above, the Exchange believes that the proposal would
incentivize Members to submit additional order flow to the Exchange in
the form of both displayed and non-displayed orders in securities
priced below $1.00 per share, thereby enhancing liquidity and market
quality on the Exchange to the benefit of all Members, as well as
enhancing the attractiveness of the Exchange as a trading venue, which
the Exchange believes, in turn, would continue to encourage market
participants to direct additional order flow to the Exchange. Greater
liquidity benefits all Members by providing more trading opportunities
and encourages Members to send additional orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
market participants.
The Exchange does not believe that the proposed change to the Sub-
Dollar Rebate Tier would impose any burden on intramarket competition
because such change may incentivize Members to submit additional order
flow, thereby contributing to a more robust and well-balanced market
ecosystem on the Exchange to the benefit of all Members as well as
enhancing the attractiveness of the Exchange as a trading venue, which
the Exchange believes, in turn, would continue to encourage market
participants to direct additional order flow to the Exchange. Greater
liquidity benefits all Members by providing more trading opportunities
and encourages Members to send additional orders to the Exchange,
thereby contributing to robust levels of liquidity, which benefits all
market participants. The opportunity to qualify for the Sub-Dollar
Rebate Tier would be available to all Members that meet the associated
volume requirements in any month. For the foregoing reasons, the
Exchange believes the proposed change would not impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Intermarket Competition
As noted above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. Members have numerous
alternative venues that they may participate on and direct their order
flow to, including 15 other equities exchanges and numerous alternative
trading systems and other off-exchange venues. As noted above, no
single registered equities exchange currently has more than
approximately 15% of the total market share of executed volume of
equities trading. Thus, in such a low-concentrated and highly
competitive market, no single equities exchange possesses significant
pricing power in the execution of order flow. Moreover, the Exchange
believes that the ever-shifting market share among the exchanges from
month to month demonstrates that market participants can shift order
flow or discontinue to reduce use of certain categories of products, in
response to new or different pricing structures being introduced into
the market. Accordingly, competitive forces constrain the Exchange's
transaction fees and rebates and market participants can readily choose
to send their orders to other exchange and off-exchange venues if they
deem fee levels at those other venues to be more favorable. As
described above, the proposed change represents a competitive proposal
through which the Exchange is seeking to incentivize market
participants to direct additional order flow to the Exchange through
the volume-based Sub-Dollar Rebate Tier. Volume-based tiers have been
widely adopted by exchanges, including the Exchange. Accordingly, the
Exchange believes the proposal would not burden, but rather promote,
intermarket competition by enabling it to better compete with other
exchanges that offer tiered pricing structures and incentives to market
participants.
Additionally, the Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \13\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. SEC, the D.C. Circuit
[[Page 64007]]
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\14\ Accordingly, the Exchange
does not believe its proposed pricing change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\13\ See supra note 10.
\14\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSE-2006-21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \15\ and Rule 19b-4(f)(2) \16\ thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A)(ii).
\16\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-MEMX-2023-21 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-MEMX-2023-21. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-MEMX-2023-21 and should be
submitted on or before October 10, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20081 Filed 9-15-23; 8:45 am]
BILLING CODE 8011-01-P
